June 2018 Inflation figure posts at 11.23%, markets shrug in reaction

Proshare

Monday, July 23, 2018 /80:00PM / Zedcrest Capital

KEY INDICATORS

Indicator

Value

Commentary

Inflation

11.23%

As at July 23, 2018, 38bps down from 11.61% recorded in May 2018.

MPR

14.00%

Next MPC meeting scheduled for July 23 & 24, 2018

External Reserves

$47.39bn

As at July 20, 2018. A c.0.84% decrease from $47.79bn as at July 2, 2018.

Brent Crude

$72.87pb

As at July 23, 2018. A c.0.26% increase from $72.83pb as at July 20, 2018

 

 

Bonds

The bond market opened the week on a quiet note, as Inflation figure came out above expectation and as participants wait on the outcome of the Monetary Policy Committee meeting holding today and tomorrow. Yields remained relatively stable, as they compressed by a single basis point on the average across the curve. There were pockets of demand witnessed on the short- to mid-end of the curve, especially on the 2022s while yields on the long-end expanded on by 3bps on the average.

 

We expect the status quo to remain in the interim until the MPC announces its decision from it meeting. Expectations are for the MPC to maintain the benchmark rates and other monetary policy tools, what will be key will be the MPC’s body language towards current system liquidity levels and the attendant risks of pressures on the exchange rate.


FGN Bonds

Description

Bid (%)

Offer (%)

Day Change (%)

15.54 13-Feb-20

13.39

13.18

(0.12)

14.50 15-Jul-21

13.45

13.24

0.02

16.39 27-Jan-22

13.61

13.30

(0.02)

14.20 14-Mar-24

13.82

13.57

0.00

12.50 22-Jan-26

14.12

13.95

(0.02)

16.29 17-Mar-27

14.00

13.91

0.03

13.98 23-Feb-28

14.14

14.04

(0.02)

12.15 18-Jul-34

14.20

14.10

(0.01)

12.40 18-Mar-36

14.22

14.12

0.01

16.2499 18-Apr-37

14.23

14.13

0.04

Source: Zedcrest Dealing Desk
 

Treasury Bills

Consequently, trading in the T-bills market was also quiet, with mixed activities witnessed on select maturities. Discount rates compressed by a single basis point on the average across the benchmark securities.

While we expect cautious trading for the T-bills market ahead of the MPC announcements, system liquidity should support bullish sentiments during the rest of the week as expected liquidity flows spur investors to reinvest these payments.

Secondary Market Treasury Bills

Description

Bid (%)

Offer (%)

Day Change (%)

2-Aug-18

11.00

10.00

(0.05)

13-Sep-18

11.00

10.25

0.00

4-Oct-18

10.30

9.45

0.05

1-Nov-18

10.85

10.60

(0.15)

6-Dec-18

12.05

11.75

0.10

3-Jan-19

12.00

11.65

0.05

14-Feb-19

12.10

11.95

0.05

14-Mar-19

12.10

11.00

(0.05)

4-Apr-19

12.10

11.00

(0.05)

18-Jul-19

11.35

11.15

0.00

Source: Zedcrest Dealing Desk

 

Money Market

Buoyant system liquidity via inflows from bond coupon payments of N67.82bn in addition to an opening figure of N140.15bn caused a drop in the interbank money market rates. Open Buy-Back (OBB) and overnight (O/N) rates closed at 9.43% and 10.57% respectively.

 

We expect the system liquidity to remain buoyant for the rest of the week, as the outstanding FAAC payments as well as OMO maturities N404.32bn are expected to hit the system this week. The Central Bank of Nigeria however will be monitoring the liquidity levels and may deploy more than the single weekly OMO auction to stem the flows.

Money Market Rates

 

Current (%)

Previous (%)

Open Buy Back (OBB)

9.43

15.00

Overnight (O/N)

10.57

15.67

Source: FMDQ, Zedcrest Research

 

FX Market

The Naira maintained opened the week stable, as rates were maintained across most of the trading windows, the exception being the Investors’ & Exporters’ trading window. The NAFEX rate depreciated by 40k to close the trading session at N362.00/$ (from N361.60/$ closing the previous week).

FX Market

 

Current (N/$)

Previous ( N/$)

CBN Spot

305.85

305.85

CBN SMIS

330.00

330.00

I&E FX Window

362.00

361.60

Cash Market

358.70

358.70

Transfer Market

362.50

362.50

Source: CBN, FMDQ, REXEL BDC

  

 

Eurobonds

The trading session saw mixed trading sentiments on the NGERIA Sovereigns and NGERIA Corps, as yields traded relatively flat across the curve. Light investor interest could be alluded to the participants being cautious ahead of the MPC meeting holding this week.


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

 

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